Oil fell 2% early this morning as signs of growing U.S. production outweighed optimism that many other producers, including Russia, were sticking to a deal to cut supplies in a bid to bolster the market.
Reuters reports Brent crude futures were down $1.30, or 2.3%, to $55.80 a barrel as of 8:14 a.m. after touching a daily low of $55.85. U.S. crude futures were trading at $52.73 per barrel, down $1.26, or 2.3% compared with a session low of $52.85.
“We see the optimism surrounding OPEC and non-OPEC production cuts being counterbalanced by fears of higher U.S. crude production as the higher rig count of last Friday still weighs,” says Hans van Cleef, senior energy economist at ABN Amro.
A stronger U.S. dollar also weighed as the currency surged on expectations of faster U.S. interest rate hikes this year, making it more expensive to hold dollar-denominated commodities.
Last week, U.S. energy companies added oil rigs for a 10th week in a row to 529, Baker Hughes data showed, extending a recovery in activity into an eighth month. Analysts at Barclays say they expect the U.S. rig count to rise to between 850 and 875 by the end of the year, with spending on exploration and production set to increase 27% in North America.
This raised concerns that U.S. production is increasing and undermining efforts by the Organization of the Petroleum Exporting Countries and others to cut output.
